How private lenders are pressing the “mainstream”

How private lenders are pressing the “mainstream”



With an influx of private development lenders entering the market, there will, in time, be greater competition between the lenders, but what are the real benefits for introducers using these new avenu.

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With an influx of private development lenders entering the market, there will, in time, be greater competition between the lenders, but what are the real benefits for introducers using these new avenues?

B&C Distributor heard from John Waddicker, Director of Positive Commercial Finance, about the pressure private lenders are having on the more “mainstream” development lenders to enhance their products, criteria and rates…

So, what are the benefits of introducers going through private development funders?

In addition to not having ’products’ which require a project to fit directly into a defined ’box‘, or any criteria cast in stone, the speed of decision making and therefore the application process can be rather refreshing.

Introducers don’t need to wait for a bi-weekly credit meeting, or the possibility of the deal getting thrown out after a senior decision maker casts his eye over the application for the first time, a few weeks into the application process.

Unless something adverse crawls out of the woodwork, you can usually rely on the private lenders to do the deal once they have offered a formal agreement. They are quick to act and can generally get to a site within 48 hours, after an initial presentation of the facts and figures. If the site visit and meeting proves positive, formal terms are provided immediately.

We have also found the private lenders’ legal representatives to be much more focussed on getting the deal over the line, and in an efficient manner. Often development finance applications can begin to stutter with the more institutional lenders, following the instruction of either a third party QS or appraiser to look over the numbers, or when legals are instructed and a generic set of irrelevant documentation is requested or rather “extreme” insurance policies are required.
 
Importantly, RICS valuation reports are not always relied upon to “confirm” current values or Gross Development Values. No doubt all brokers will have experienced issues with property values, as presented in the nominated surveyors report. Some of the private lenders will make their own decisions on values, based on local due diligence and their experience of the market.
 
Private lenders’ appetite to lend is not restricted to just residential property development or refurbishment; they will also consider retail, mixed-use, hotel and leisure, student accommodation and healthcare, unlike most of the traditional lenders who seeminglyshy away from these cases.
 
The increase in private lender options has not had a noticeable impact on the cost of development finance yet, but with more sources of development finance comes greater competition amongst lenders to win the deal. Hopefully, given time, we will see the rates heading in the right direction, and criteria being relaxed slightly over the years to come.



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